Four Ways to Find Out Your Home's True Value

If you’ve ever wondered what your home is worth, a quick internet search might tell you. Even though online calculators will give you an estimate of your home’s value, these tools may not be that accurate. 

You might need to determine your home’s true value if you’re selling or refinancing. But there are other reasons you may want to know, like if you’re trying to remove private mortgage insurance from your home payments or you need to adjust your property taxes. If you’re looking for ways to figure out the value of your home, WorkMoney put together this list to help.

Why Should You Find Out Your Home’s Value?

Many potential sellers want to find out what their home is worth. After all, the higher your home’s value, the more you could earn when you list your house for sale. But you may want to find out your home’s value for reasons other than selling it.

1. Private Mortgage Insurance

If you put down less than 20% when you bought your home and took out a conventional loan, you had to take out PMI to get your loan. Getting a home appraisal could remove PMI earlier if you can show you already have 20% equity in your home.

2. Home Insurance Evaluation

If your home's value has increased, your home insurance coverage should reflect that. If there’s been a fluctuation in the value of your home, your insurance company should make adjustments to your policy.

3. Property Taxes

Property taxes are based on your home’s value. A higher home value could mean a higher property tax bill. But if you don’t think your property taxes accurately reflect your home’s value, you can get an appraisal.

4 Ways to Find Out Your Home’s Value

1. Online Tools

It’s free and easy to figure out your home’s value through a trove of online resources, like:

• Zillow Zestimate

• Realtor.com

• Redfin Estimate

These automated valuation models, or AVMs, use publicly available information about the home and its neighborhood to estimate the market value. But they aren’t always that accurate. 

For instance, the median error rate for Zillow Zestimate is about 1.83%, meaning half of all homes listed are within 1.83% of the final sale price, and half are not. For off-market homes, the median error rate is about 7%.

Despite inaccuracies and a large margin of error, you can use these calculators to get a ballpark figure of your home’s value. But use it only to get a general idea of your home's value, not to make major financial decisions.

2. Use the FHFA Index

The Federal Housing Financing Agency (FHFA) collects publicly available price indexes based on data from the mid-1970s through today. It includes data from all 50 states.

The FHFA House Price Calculator uses your geographical location, purchase price, when you bought your home, and how much you paid for it in its calculations. It doesn’t ask you to enter specific home details, such as how many bedrooms you have or the square footage. It won’t project the value of a home, but it gives you a good idea of what your home could be worth based on the data you share.

3. Get a Competitive Market Analysis

You might find more accurate figures by getting a competitive market analysis (CMA) through a real estate agent. Real estate agents get a fair market value of your home when they compare it to other homes near you that have recently sold or are currently on the market.

Expect to pay between $200 and $400 for a CMA. 

4. Pay for a Professional Appraiser

A home appraisal is the only thing on the list that you have to pay for, but it’s the one that’s the most official and accurate. Licensed real estate appraisers conduct home appraisals to determine the true market value of a home. 

Appraisers evaluate everything inside and outside the home. They review the age and condition of your roof, appliances, flooring, electrical panel, and other areas of the house to figure out its value. Appraisers also look at other homes in your area, especially as they compare to the size and offerings of your home. 

Appraisals vary a lot by where you live, the size of your home, and who you hire. Most appraisals cost around $400 and take about an hour to complete. You should get your report within a week.

Which Way Is Right for You?

Getting an appraisal is the most reliable way to determine your home’s true value, but it’s not always financially feasible for everyone. First, do some preliminary research using free online tools to get a ballpark idea of your home’s value. It’ll help you decide whether hiring a professional is worth the investment.

Getting your home’s true market value is vital if you need to adjust your property taxes, remove PMI, or adjust your homeowners insurance coverage. The best way to do that is through a licensed, experienced home appraiser. Talk to your neighbors, friends, and family members for recommendations. If you use a real estate agent to help with your CMA, ask if they have any suggestions on appraisers. That way, you can find someone you trust without going into it blind.

The Bottom Line

You may not have thought about needing to know your home’s worth, especially if you didn’t have plans to sell it anytime soon. But knowing the true value of your home is necessary for several reasons, beyond selling it. 

While some ways aren’t necessarily the most official or beneficial, you can use one or all of them to find your home’s true value, since they all serve different purposes. Using all of them can help you make smart, informed decisions when it comes to your home.